Every day at a busy corner in downtown Bellingham, Washington, thousands of drivers gaze into a bright, bustling cafe. The building itself is an attention grabber, with striking terra cotta relief columns in Mediterranean colors breaking up a facade which is 1920s vintage car dealership.
Community Food Co-op, a leading Northwest Washington natural foods retailer and home of the Swan Cafe, opened in this location in May 1994 after a long and arduous gestation. The 15,000 square foot building was remodeled into a 9,500 sq. ft. retail area and 2,500 sq. ft. cafe. The eye catching Swan Cafe, located in the old car showroom, features huge windows and a terrazzo floor. The retail sales area has exposed natural wood trusses supporting 15-foot ceilings. Natural light is provided by three large skylights and a clearstory. It is a beautiful space.
Bellingham is a coastal city of 55,000 located ninety miles north of Seattle. The Georgia Pacific paper mill is one of the county's biggest employers, along with Western Washington University and dairy and fishing industries. If you were designing a town for a natural foods co-op, you would make it much like Bellingham. Its proximity to both water and mountain recreation and its relatively small size are attractive to people interested in fitness and health. The presence of the university raises the level of education and makes for a vital intellectual and cultural commuity.
Members capitalize and patronize
Membership in the cooperative is of course open to anyone. Members pay an annual fee of $4 to cover administration of the membership program and also make a capital contribution of $90 to the Co-op. The capital contribution is 100 percent refundable should a member withdaw their membership. As of September 1995, the co-op had over 4,000 active members and $323,000 in member capital contributions.
Members pay the shelf prices, while nonmembers pay a 6.5 percent surcharge at the register. Members also receive a monthly newsletter, elect the board of directors and vote in special elections, and may join the Industrial Credit Union. Members account for 77 percent of our total retail sales.
Off to a pretty good start
Business at the new site has been good right from the start. Sales quickly climbed until they averaged 70 percent over those in our old store. Three quarters of the way through our current fiscal year, sales are over $3.6 million and averaging about 13 percent over the first year, putting us on track for $5.3 million in sales for 1995.
The grocery side of the operation has performed well pretty much from the beginning. The increased offerings in all departments, the ease of parking and improved front end service have all helped increase sales. Improved back room facilities generated rapid increases in productivity. The cost of adding a fully staffed customer service desk and increased presence in our health and bodycare department mitigated somewhat the increases in productivity. But the improved services also played an important role in orienting new customers to the store.
Taking the restaurant plunge
The addition of the Swan Cafe was a big change. In our old location the co-op had only twelve feet of self-serve deli products in a single refrigerated cases. We opened the Swan Cafe with 55 seats and a varied menu of cook-to-order dishes. Last fall we extended our hours and added breakfast. This spring we introduced a new dinner menu for the evening hours.
In addition to the cafe, our food service operation also includes a full-service deli and fish department. Food service sales account for 14.5 percent of total sales.
"Problems with team effectiveness stem almost exclusively from the tone set by management and the amount of training in problem-solving and group decision-making skills."
None of us on the management team had run a restaurant when we entered the business. Our food service manager had many years of experience managing kitchens and had run our deli operation for three years before we moved. We knew that the success rate for restaurants is very poor, but we also knew that there was a wide open niche for a natural foods restaurant in our town. The former showroom in the corner of the building also was a natural location for a dining area and offered great exposure. We took the plunge.
It seared us, though, and from the beginning we've approached the food service operation as a separate accounting entity. As much as possible we've tried to isolate the food service costs from the rest of the store, allocating them against their sales to get as true a picture of profitability as possible. It has paid off handsomely. We've known just how much money we were losing ever since we opened!
We created a difficult challenge for ourselves. We made a commitment to making most things from scratch in both the deli and the cafe. Of course, we wanted to have good prices too. We also made the decision not to have a separate, more restaurant like, wage and benefit structure for the food service, but rather to pay our food service workers the same wages and benefits as those in the grocery operation. The result has been that we have had difficulties bringing our labor costs and margins into line with profitability.
We have constantly tinkered with the program and made slow but steady progress. Over the summer we took more steps to boost productivity which seem to have put us over the top. In the last four months, sales per labor hour have increased $4 to $22 per hour. For the quarter just ended, we anticipate that we'll break even or maybe show a small profit.
Our first year and a half in the new facility has been a success by most financial measures. Even our struggles with food service have been characterized by steady albeit slow progress. With all this must come happiness, right? Unfortunately, it hasn't been that simple. While the business has continued to prosper in the new location, the shock of the change to the work force has been more challenging.
We knew there would be big changes in the new store, but in the same way that you're never ready for the arrival of a first child it was difficult to prepare for our new life. Our staff immediately doubled in size. Most of the new employees worked in the food service operation, where the self-contained nature of the operation combined with having so many new workers to reduce the interaction between those workers and the rest of the staff. The building itself is three times the size of the old one; even in the grocery operation, where there were many fewer new people, intimacy was reduced. It's quite possible for workers in different parts of the store to work all day without seeing each other. Some workers go weeks without seeing each other at all, a situation that just didn't exist in the old store.
But all this was stuff we knew was going to happen and had tried to prepare for. How well did we prepare? The answer is, not nearly well enough. I think it is safe to say that we were preoccupied with ensuring the financial survival of the business. Despite our awareness of the stresses on the work force that moving would cause, we didn't pay enough attention to smoothing that transition. A year and a half later, we're beginning to make progress.
How did it happen?
One factor contributing to our slow response was a degree of burnout on the part of the managers. Our moving process was five years long. It had many emotional ups and downs. In the 1992 article I wrote for Cooperative Grocer, I had said we were about to start remodeling. In fact, from the time that article appeared it took another year and a half of fiddling to put the financing together. In that time our plan to own the building fell apart, and we eventually sold the building to a developer who financed the remodel for us. So, even before we put in the actual move into the new store, we had been through many long hours and emotionally draining experiences.
Paradoxically, another barrier was the strength of our management team. Two of the managers have been with the co-op since the mid-1970s; I have been the general manager for ten years; and the newest member of the team, while a manager for only the last year, had been with the store for four years as the deli coordinator in the old location. Our strength helped us make a pretty successful business transition to the new store. On the other hand we have tended to retain too much authority and decision-making power at the level of upper management.
The scale of the old operation and the length of time we had been in the old location served to obscure the fact that virtually all of the decisions needed approval by the managers. We in management believe in and value initiative and good thinking on the part of the work force, but our behavior didn't reinforce that belief Without meaning to or quite realizing it, we had created a climate where initiative and decision making was severely circumscribed at the team and middle management level.
The new space quickly presented challenges in terms of problem solving and developing systems. Progress on both fronts was frustratingly slow for everyone. We on the management team correctly diagnosed that we were playing a major role in that, but until very recently we were misunderstanding the nature of our role. As general manager, I was gradually making a shift in my thinking to believe that we needed to adopt more traditional structures of supervision and methods of ensuring that standards and expectations are met. In reality, the thing we had failed to nurture among the work force was the feeling of belonging and trust that real decision-making authority brings. The drift toward more traditional control and enforcement style of management was moving in precisely the wrong direction.
Teams: form and substance
We brought to the new store a team system we had been using for the previous eight years. In that system our work force is divided into teams, primarily along departmental lines. Each team has a coordinator whose job it is to oversee both the operational work of the team and to facilitate the team aspects as well. Teams meet monthly with the purpose of discussing and solving work related problems, as well as discussing policy and programs that may be in the offing. On paper the system looks good; in practice it was not working effectively.
Problems with team effectiveness have nothing to do with the inherent abilities of the team members. They stem almost exclusively from the tone set by management and the amount of training folks receive in problem-solving and group decision-making skills. For years we have made the mistake of thinking that people can learn these skills just by being in team meetings. We have paid very little attention to training either our coordinators or the workers to use the meetings effectively. Combine a lack of skill at the team level with the proclivity of management to retain control and you have a prescription for ineffective teams.
I have only recently begun to appreciate the interrelationship of the management climate we brought with us from the old store and the problems we have had making the transition to the new one. All of us who work at the co-op have high expectations for how it should feel to work here. As managers we've made it clear that we want this to be a different kind of place to work, and we are working to make sure our actions back up our words. Meeting the challenges and establishing new ways of building feelings of togetherness and mutual support is going to take some time and work, but it is as important a component to our long-term success as anything else we do.